VICI executives are hosting a call to discuss their Q2 2023 results, which have seen 11.9% year-over-year AFFO per share growth. They will provide some opening remarks before opening the call to questions. The call will also discuss their expanded growth partnership with Canyon Ranch, a leading wellness brand, and the executives are currently conducting the call from the Canyon Ranch Lennox in the Berkshires.

VICI and BG have made a combined investment of up to $500 million in Canyon Ranch to fund its expansion and refinancing of existing CMBS debt. This includes the development of Canyon Ranch Austin, the potential acquisition of conventional resorts, and the conversion of existing purchase options to call rights. Canyon Ranch has a long history of serving affluent clients and is now positioned to expand its reach domestically and internationally.

VICI Properties is partnering with Canyon Ranch to fund and expand the brand reach and network breadth of the Canyon Ranch team. This includes the potential to convert conventional resorts to Canyon Ranch Resorts, which could provide a competitive advantage due to the maximization of guest experiences and higher revenue intensity. VICI and Canyon Ranch view this as a generational opportunity.

VICI is investing in partnerships and real estate assets that will preserve and grow value for many generations to come. They have expanded their partnership with Canyon Ranch and have acquired four gaming assets from Century Casino in Alberta to expand their international reach. Their tenants are proving their operational excellence and their ability to innovate and evolve their business, which contributes to the value of their real estate.

VICI is looking to partner with growth-minded operators such as Century Casinos and Canyon Ranch to expand their portfolio of assets and grow their relationships across gaming and non-gaming sectors. They are impressed by the operational excellence of their tenants and the record results and traffic in Las Vegas and regional casinos. VICI is also looking at international opportunities and has added resources to meet the expanding funnel of opportunities.

VICI is working closely with their advisers and those in the VICI network to evaluate and create opportunities in the family entertainment and sports categories. They are focused on partnering with best-in-class growth-minded operators to build relationships and grow their real estate portfolio. They are also paying close attention to their balance sheet, working to bring their leverage back down to their target range and ensuring they have enough funds to continue to fund accretive growth.

VICI Properties reported $4 billion in total liquidity at the end of the quarter, with $740 million in cash, $870 million in net proceeds from forward sale agreements, and $2.4 billion in availability from a revolving credit facility. AFFO per share was $0.54, a 12% increase from the previous quarter. G&A was 1.7% of total revenues, and VICI is expecting AFFO to be between $2.13 billion and $2.16 billion, or between $2.11 and $2.14 per diluted common share, for the year ending December 31, 2023, representing a 10% year-over-year growth rate.

The speaker emphasizes the company's commitment to creating value for investors by only buying what they can accretively pay for. They evaluate every situation based on whether they can create value for investors from the outset, as the net lease model yields are fixed and any rent escalation is gradual.

Edward Pitoniak explains that VICI is usually not looking to make investments into operating platforms, however, they saw the unique opportunity with Canyon Ranch and their growth potential in the wellness sector, which McKinsey estimates to be a $1.5 trillion global industry. David will then answer the first part of the question, which is whether the investment into the operating platform will make money from a cash flow or earnings point of view.

David Kieske explains that they have provided a pref and will fund the loan in the near future, which is a great opportunity for the organization to grow together. Jim asks about the implicit CPI in the guidance for the year and Kieske explains that they assume base rates. John Payne then explains that they have been adding resources to study new verticals, such as bringing on a new Chief Investment Officer and staff under David and Aaron's team.

VICI takes great care when underwriting credit and only lends against assets they would be happy to own. This is especially beneficial in the current market, which is down 60-70% year-over-year. VICI is also continuing to study gaming assets despite their focus on nongaming growth.

Citi's Smedes Rose asked if unionizing at the Venetian Pallo would change tenant coverage ratios, to which John Payne responded that it is hard to quantify and that VICI has collected 100% of its rent from all operators regardless of business performance. Edward Pitoniak added that the Venetian disclosed their expected 2022 EBITDAR and rent collection of $250 million. Lastly, Smedes asked if there would be an announcement this year regarding family entertainment and sports, to which Payne responded that they were looking into it and exploring unique opportunities.

Edward Pitoniak of the company explains that they are willing to accept a lower yield on the highest quality real estate as long as it is still accretive. He states that the company is looking for a blended yield across their investment activity, and that they cannot accept a dilutive yield in the name of quality.

David Kieske and Edward Pitoniak discussed the value created for shareholders through the acquisition of Canyon Ranch, a mansion in the Berkshires. They did not disclose specific details about the pricing of the preferred equity investment and mortgage financing, but said that it was all aimed towards creating a blended yield that was accretive to their cost of capital. They could not provide an exact answer to the mix of rent between gaming and non-gaming tenants, but said that it would depend on what they are able to source globally.

Edward Pitoniak and John Payne discussed the pipeline of gaming opportunities, which can be broken into two buckets: operators they have already worked with and have good relationships with, and larger operators who have not done much sale leaseback or any. They plan to continue building relationships with existing operators and meeting with operators they have not yet done business with, educating them on how their capital can work and how they can use a property growth fund to help them grow. They will also travel domestically and internationally to find other unique opportunities.

Edward Pitoniak discusses the potential for growth of the Canyon Ranch brand both domestically and internationally, noting that John Goff expressed his ambition for the brand to reach $2 billion in the coming years. Pitoniak also mentioned that Canyon Ranch would have received amazing pricing if they had sold the real estate to a conventional hotel REIT, but instead chose to form a partnership with an understanding of their capital needs.

David Kieske and Wesley Golladay discussed the cash balance that was settled for $190 million to fund the Rocky Gap transaction, with the cash balance currently sitting at $700 million. Edward Pitoniak and John Payne then discussed the two assets in Indianapolis owned by Caesars, with the operator continuing to add capital and implement table games to the facilities. David Kieske stated that the leverage will continue to trend down to the 5.5 range.

Edward Pitoniak and John Payne discuss the potential impact of student loan repayments on the gaming industry, noting that the current infrastructure investment in the US could offset any negative effects. They then provide an example of the success of the industry in Las Vegas, citing the record-breaking number of international travelers in June.

John DeCree asked Edward Pitoniak and John Payne about the challenges they face as they expand into new verticals and tenant base. John Payne responded that he wouldn't describe them as challenges, but rather as fun opportunities to explain how their company and capital can help experiential companies grow. DeCree then asked about the potential opportunity of owning part of the Bellagio, and whether VICI would consider a partial sale or minority stake in any future investments.

Edward Pitoniak and John Payne of MGM Grand Mandalay Bay discussed the strategic motivator of consolidating a joint venture, and their preference for complete ownership of assets. They also provided context for the investable global gaming market, noting that the size of the market is not as important as its per capita size. As an example, they mentioned that the GGR in Canada is $12 billion a year, compared to the combined Las Vegas and regional commercial GGR in the U.S. of $70 million to $80 million.

John Payne states that the company is interested in partnering with operators in Downtown Las Vegas and the regional market of Las Vegas. Edward Pitoniak adds that the company is focused on Canyon Ranch due to their market leadership and growth potential, but would not rule out other investments in the wellness sector.

Edward Pitoniak explains that John Goff is getting to do again what he did in the early 1990s with Richard Rainwater when they created Crescent Real Estate. David Kieske has done some work to develop inventories and they are beginning to filter through regions that Canyon Ranch could benefit from being in. Nate Crossett asks if it is accretive and David Kieske says it is in line with their average spreads over the cost of capital and they funded $90 million to draw schedule to invest in the organization.

Edward Pitoniak explains that Canyon Ranch has been in operation for 45 years and has shown resilience throughout all economic cycles due to its loyal customers. He also states that they do not need high coverage because of the commitment of the consumer to the resort. David Kieske adds that Canyon Ranch announced a $200 million investment in Austin in October and they are hoping for more in the near future.

Edward Pitoniak believes that the current debt environment is advantageous for larger REITs with access to capital, and he believes that this advantage will continue for the next few years. David Kieske adds that the coverage levels on the Rocky Gap property, which was folded into a master lease with Century, are very healthy, and Century has improved coverage on the 3-pack purchased in 2019.

The CEO thanked everyone on the call for their participation and expressed excitement for the next call in a few months. He also mentioned that yields to worst on gaming and leisure credits remain attractive despite recent spread tightening, making sale leasebacks a viable option for refinancing debt.

This summary was generated with AI and may contain some inaccuracies.